Expectations of healthy growth boost US currency

However, the greenback lost ground against the New Taiwan dollar on the Taipei Foreign Exchange on Friday, decreasing NT$0.01 to close at NT$33.009.

A total of US$1.4 billion changed hands during the day's trading.

The US currency opened higher at NT$32.917, and fluctuated between NT$32.917 and NT$33.107.

The euro slipped to US$1.3442 at 9pm GMT from US$1.3454 in New York late on Thursday, after earlier in the day slipping below the US$1.34 mark for the first time in almost two months.

The US dollar rose to ?122.09 -- hitting its highest level since late January -- from ?121.71 on Thursday.

The US currency picked up momentum after data showed the US economy added a net 157,000 jobs last month, better than expected. Analysts said the report suggests the economy is coming out of its first-quarter soft patch but that inflation remains only moderate.

The payrolls are a key event for the market, which is anxious for fresh clues on the outlook for US interest rates.

The Federal Reserve has been on hold for nearly a year with base US rates at 5.25 percent. In recent months, market participants have shifted away from a perception that the Fed will need to cut rates to stimulate flagging growth.

Stephen Gallagher, economist at Societe Generale, said he has now thrown in the towel on his forecast for a Fed rate cut this year, and now sees the next move by the US central bank as a rate hike.

"More and more we are convinced the mid-cycle slowdown has ended and the economy is currently firming to trend," Gallagher said. "Against a backdrop of stubborn inflation and tight labor markets, our analysis going forward will be more focused on the timing of rate hikes, not cuts."

Meanwhile, the closely watched US ISM survey on manufacturing activity came in above forecasts, rising to 55.0 last month from 54.7 in April to reach its highest level for 12 months.

Analysts said the good news on the US economy was enough to offset evidence of moderating inflation, with the annual core PCE indicator -- the Federal Reserve's preferred measure of inflation -- dropping to a 13-month low of 2 percent, according to a US Commerce Department report.

The report also showed US consumer income down 0.1 percent in April, while spending rose 0.5 percent.

While the data as a whole shored up the dollar, there was some skepticism about the perceived improvement in the figures.

"The strength in May payrolls has largely emerged from services jobs, the durability of which remains doubtful," Ashraf Laidi at CMC Markets said.

Against this backdrop, the outlook for US interest rates is still cloudy, he noted.

Michael Woolfolk at Bank of New York said the easing inflation indicators suggest the Fed will be in no hurry to hike rates, and this limited the dollar's rally. But he said the greenback is keeping upward momentum.

"The real surprise in this morning's price action was not the relatively modest reaction to nonfarm payrolls and personal income and spending, but rather the positive dollar tone," he said.

"A ubiquitous sense of economic recovery pervades the market right now, which is unequivocally positive for the dollar. ... While players are having difficulty breaking below the 1.3400 level in the euro-dollar, further signs of the US economic rebound should make this a fait accompli by next week," Woolfolk said.